Euro under pressure after China rate hike

27/12/2010 00:00 AST

The euro fell in Asia Monday as investors sold the risk-sensitive currency after China's interest rate hike raised worries about a possible drag on the country's economic growth, dealers said.

The euro eased to 1.3095 dollars in Tokyo morning trade from 1.3118 dollars in New York late Friday. The European single currency also dipped to 108.60 yen from 108.70 yen. The dollar edged up to 82.92 yen from 82.82 yen.

"Trading is likely to be thin and whatever little news there is, it points to a stronger greenback," a trader at an international bank told Dow Jones Newswires.

The euro was down against the yen as prospects for lower Chinese economic growth weighed on riskier, higher-yielding currencies including the euro, said Hideaki Inoue, dealer at Mitsubishi UFJ Trust and Banking.

China's central bank on Saturday raised interest rates for the second time in less than three months as authorities ramp up efforts to curb borrowing, rein in property prices and tame inflation.

The People's Bank of China said in a one-line statement that it would raise the one-year lending and deposit rates by 25 basis points each. The move takes the rates to 5.81 percent and 2.75 percent respectively from Sunday.

The sentiment also remained weak for the euro as European leaders have so far failed to convince the market with definitive measures to tackle the financing problem of troubled eurozone member states, dealers said.


Reuters

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